New politics and economics — export opportunities and risks
Efic’s latest edition of World Risk Developments reviews a range of geopolitical developments around the world and their impact on Australia’s exporters.
We focus on Turkey’s election result, which has delivered a major shift in politics — President Erdoğan’s dominant AKP Party failed to secure an overall majority for the first time since its creation.
‘This increases near term political and economic uncertainty, but improves longer term prospects by making the political system more contestable, according to Efic’s senior economist Cassandra Winzenried.
‘We also review potential opportunities for Australian exporters arising from growing expenditure on Africa’s infrastructure and progress on India’s ambitious pro-business reform agenda’, says Winzenried.
But creating new risk for Australian business is the decoupling of China’s stock market from economic fundamentals and corporate earnings growth.
‘A liquidity-driven surge in Chinese stocks has raised fears of a policy-induced asset bubble that could threaten financial stability’, says Winzenried.
The threat of tougher sanctions on Russia is also weighing on sentiment. According to Winzenried, ‘February’s ceasefire looks increasingly fragile’. ‘New sanctions would further ostracise Russia from the international community and cause its already suffering economy to contract further.’
Meanwhile an outbreak of Middle East Respiratory Syndrome (MERS) has prompted South Korea to cut interest rates. ‘The MERS panic is expected to take a heavy toll on tourism and consumer confidence, but Australia’s third largest export market is also suffering from broader long term economic headwinds’, says Winzenried.
Political risk also remains elevated in Thailand one year after the army staged its coup. ‘Thailand’s return to democracy continues to be delayed, with the uncertainty weighing on Australian exports to ASEAN’s second largest economy’, says Winzenried.
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Photo credit: © Murad Sezer / REUTERS / PICTURE MEDIA